Local Media in a Postmodern World

It's Always About the Money

by Terry Heaton

When the Internet bubble burst early in the new millennium, many smart people learned the harshest of all business lessons: when the money's gone, there is no business. Great ideas aren't self-sustaining, and when the investors decide they've given enough, it's over, unless you can actually make money. Business is business, and while many of us frolicked in the coolness of innovation, those who paid attention to the bottom line were stressed to the max. In the end, it's always about the money.

Local media companies have frolicked in a world of easy money for decades — sitting back and taking orders from deep pockets who needed us to get their message out. Along the way, many mixed the mission of media with double-digit revenue growth and came to the conclusion that this was the way it was meant to be — that owning a printing press or broadcast tower brought with it some inalienable right to easy profit. This, of course, made us sitting ducks for disruption.

And today, amid the confusion of that disruption, it's tough to untangle mission and revenue. It is, however, a necessary task, for while we're trying to sustain our belief in our mission and the idea that advertisers ought to pay for it, the disruption has other ideas. And those ideas involve money.

Two years ago, I first published this image of the iceberg that threatens local media. The Real Threat to Local Broadcasters has actually gotten worse, and it's mostly because we can't seem to see what's beneath the surface, choosing instead to play a game of multi-platform distribution.

We dare not peek beneath the surface, but we must. As Upton Sinclair wrote long ago, "It's hard to get a man to understand something, when his salary depends on his not understanding it." This is our problem. This is our sin, one for which we can only assign blame to the mirror. Some local media companies are about to die — as in, go away permanently — if we don't do something about it.

J. D. Lasica first coined the term "Personal Media Revolution" in his seminal book, Darknet, Hollywood's War Against The Digital Generation, and it is complex and profound. However, most people in media think of it as just bloggers and YouTube and Facebook and such. The demagoguery of Andrew Keen in his book, Cult of the Amateur has done considerable harm to media company thinking, because it badly misses what's really taking place and instead offers a "professionals versus amateurs" theme.

The problem is that the rise of personal media includes the use of its technology by businesses, and this is the ultimate disruptor for professional media and the advertising industry that supports it. When a business creates a dynamic website, it becomes a media company, and nobody knows this better than our friends at Google. Go back and look at the iceberg, for the rise of personal media is supported by the internet pureplay companies, who view the Web itself as their business platform.

When Google launched its money machine — an advertising system called AdSense — it allowed anybody with a web presence to earn money by placing simple text ads on their sites. The volume of its distribution is so staggering that Google can charge the advertisers based solely on the number of people who actually engage with the ads by clicking. A quiet industry built around this has bubbled up, and AdSense is just the beginning.

Now Google has announced free ad management software for websites, which will introduce all kinds of display ads to this same world. Anybody — read that anybody — can now sell advertising and run a complex rotating and targeting ad campaign on their website. Once again, Google is by-passing Madison Avenue in building an extraordinary machine to help the process of buying and selling in our culture.

Institutional advertising is saying, "Just show us the new formula (so that we can figure out how to game it on behalf of our clients)," while the new enterprise is gathering steam without them. It's all about by-passing the existing mechanisms, which is what textbook business disruptions do.

Internet visionary and pioneer Jeff Jarvis has been calling for an open source, open ad network for several years. He was prescient then, and his words in the wake of Google's announcement offer fair warning to traditional advertising:

Google Ad Manager is one critical piece in creating the open network of networks where any site can take any ad and any marketer can advertise on any site. When that day arrives, we all become atoms that can attract to one molecule or another, no longer locked into one network. We start to see a truer marketplace for online advertising. We also get to see small sites gather together in large, ad hoc networks to compete with big sites — and this, I believe, will encourage and support the creation of more small sites. God’s work. Or now Google’s...

...There’s just one issue: It’s not open-source. And it’s Google’s.

Google’s benefits are clear: By offering free ad-serving to sites, it has an opening to be on many more sites, and when they don't have ads of their own to serve, Google can serve AdSense and make some more money. Google also gathers incredible data about ad performance and pricing and about the sites themselves. One big problem with its program is that it doesn't share that data with the publishers and let them use it to more efficiently serve its ads. It also doesn't share it with advertisers and let them take advantage of a more transparent marketplace.

No, Google’s holding onto that information itself and, once again, becoming smarter than all of us. And I say that’s our own damned fault for not building our truly open ad marketplace. It’s not too late, but it soon will be.

Google's ad manager is also going to upset the Madison Avenue side of the media/advertiser hegemony, because it lowers the price of serving online ads to zero. In so doing, it calls into question the value proposition of online ad networks that require compensation of some form — beyond the revenue share — for the serving of ads.

But the biggest changes to come will be brought about by small entrepreneurs who are now able to serve any kind of advertising anywhere. Madison Avenue hasn't been willing to change, because there's too much at stake. So, once again, change will come from the bottom.

New forms of ad networks and ad agencies will spring up to connect advertisers with those willing to run ads on their sites. We can be the ones who do this, or we can continue to sit back and let it happen around us.

We need to build these networks, and they don't need to involve massive audiences. The most frustrating comments I hear from media companies in trying to help them build a network are complaints about the size of the audience in a niche. The old media mind thinks only in terms of mass and sets about a course to get from nothing to mass in a hurry. It's not about mass; it's about aggregating mass.

Media companies cling to their portal websites as if their place in the digital future is certain. It's not — and this is especially true at the local level — because commerce can and will be conducted without them. It's no longer (it hasn't been for awhile) about who has the biggest mass audience. Mass can be created through gathering lots of little pixels from the overall picture that is the World Wide Web.

Advertisers big and small will increasingly have marvelous tools at their fingertips that will allow them to talk to people in the community without going through traditional media audiences, and that will be the end.